Estimate your periodic retirement cash flow from a lump-sum investment.
Monthly
Quarterly
Annually
Estimated Periodic Income
$0.00
(Please enter values)
Total Payout Over Time:$0.00
Total Earnings Growth:$0.00
Understanding Your Income Annuity Calculation
An income annuity is a powerful financial vehicle designed to convert a significant sum of capital into a guaranteed, predictable stream of revenue. Often used as a pillar of retirement planning, it mitigates "longevity risk"—the danger of outliving your savings.
Key Components of the Calculation
Lump Sum Investment: This is the initial principal amount you deposit with the insurance company or financial institution.
Annual Payout Rate: The internal rate of return or growth rate applied to your principal. Note that in actual annuity contracts, this is determined by age, gender, and market conditions.
Payout Period: The duration over which you wish to receive payments. A shorter period generally results in higher periodic payments.
Frequency: Most retirees prefer monthly distributions to mirror a traditional salary, but quarterly or annual payouts are available for different tax or budgeting needs.
Formula Used
The calculator uses the fixed-period annuity formula:
Payment = [PV * r * (1 + r)^n] / [(1 + r)^n – 1]
Where PV is your investment, r is the periodic rate (annual rate divided by frequency), and n is the total number of payments (years multiplied by frequency).
Realistic Example
Imagine you invest $250,000 at a 5% annual rate for 20 years with monthly payouts:
Principal: $250,000
Monthly Income: ~$1,649.89
Total Payout: ~$395,974
Total Growth: ~$145,974
Disclaimer: This calculator is for educational purposes only. Actual annuity rates are subject to underwriting, fees, and the financial strength of the issuing institution.
function calculateIncomeAnnuity() {
var principal = parseFloat(document.getElementById('initialInvestment').value);
var annualRate = parseFloat(document.getElementById('payoutRate').value);
var years = parseFloat(document.getElementById('payoutDuration').value);
var frequency = parseInt(document.getElementById('frequency').value);
if (isNaN(principal) || isNaN(annualRate) || isNaN(years) || principal <= 0 || annualRate < 0 || years <= 0) {
alert("Please enter valid positive numeric values for all fields.");
return;
}
// Convert annual rate to decimal and periodic rate
var r = (annualRate / 100) / frequency;
var n = years * frequency;
var periodicPayment = 0;
if (r === 0) {
// If rate is 0, it's just principal divided by number of periods
periodicPayment = principal / n;
} else {
// Annuity formula: PMT = [PV * r * (1+r)^n] / [(1+r)^n – 1]
var factor = Math.pow(1 + r, n);
periodicPayment = (principal * r * factor) / (factor – 1);
}
var totalPayout = periodicPayment * n;
var totalEarnings = totalPayout – principal;
// Update DOM
document.getElementById('periodicIncome').innerText = "$" + periodicPayment.toLocaleString(undefined, {minimumFractionDigits: 2, maximumFractionDigits: 2});
var label = "per month";
if (frequency === 4) label = "per quarter";
if (frequency === 1) label = "per year";
document.getElementById('payoutLabel').innerText = "(" + label + ")";
document.getElementById('totalPayout').innerText = "$" + totalPayout.toLocaleString(undefined, {minimumFractionDigits: 2, maximumFractionDigits: 2});
document.getElementById('totalEarnings').innerText = "$" + totalEarnings.toLocaleString(undefined, {minimumFractionDigits: 2, maximumFractionDigits: 2});
}